Easing of road project exits opens up new opportunities

Buying and selling road projects in India just got easier. On 9 September, the National Highways Authority of India (NHAI) issued a circular relaxing the equity lock-in restrictions for concessionaires for its build-operate-transfer (BOT) projects. This new policy allows concessionaires to completely divest their equity from road BOT projects two years after the completion of construction provided that their divested equity is:

• Reinvested in incomplete NHAI projects;
• Reinvested in other highway projects;
• Reinvested in power projects; or
• Used to retire debt owed to financial institutions in road or other infrastructure projects.

The past several years have seen few bids for public-private partnership projects in India, in part because of the lack of available equity.

During 2014-15, roads in India were built at an unimpressive 12 kilometres per day, against the targeted 17 km/day. Despite not meeting this target, the Ministry of Roads, Transport and Highways’ projected average of close to 30 km/day for 2015-16 is nearly double the previous year’s target. While this projection is ambitious and may be difficult to achieve, the new policy should help in freeing locked-in equity and increasing interest in the sector.

Akshay Jaitly is a partner at Trilegal and Samkit Sethia is an associate. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.